Suppose you have $5,000 and plan to purchase a 10-year certificate of deposit (CD) that pays 2.0% annual interest, compounded monthly. How much will you have when the CD matures?

(Hint: You need to convert the annual interest rate 1.2% into the monthly interest rate, and convert 15 years into 10*12= 120 months to get correct answer).

Suppose the U.S. Treasury offers to sell you a bond for $850.00. No payments will be made until the bond matures 7 years from now, at which time it will be redeemed for $1,000. What interest rate would you earn if you bought this bond at the offer price?